Top Things You Should NOT Do Before Going Bankrupt
Too many bills? Too much debt? Not enough money? Most people struggle financially at some point in their lives. Unexpected events like hospitalisation, losing a job, and even divorce, can greatly reshape your financial circumstances. But, when there is no other way to properly handle your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, demanding, and emotional. As a result, lots of people dig themselves a deeper hole before even filing for personal bankruptcy. It’s vital that you seek professional advice pertaining to your bankruptcy options. There are various financial decisions that should be avoided at all costs to avoid wreaking havoc on your bankruptcy case. This article will provide some tips on things you should never do before going bankrupt.
Using Credit Cards
The first thing you should do when you are having financial troubles is to stop using your credit cards. Although it is tempting to make small purchases like food and petrol, the fact is that credit cards have exorbitant fees which only get compounded when you’re incapable to make repayments. Along with this, making substantial purchases with the knowledge that you will shortly be going bankrupt is considered fraud. Naturally, small purchases are fine, but if you purposely max out your credit cards prior to filing for bankruptcy, creditors will investigate and you’ll find yourself in a much worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. Though it may appear to be logical to payoff as much debt as possible, the reality is that it can land you in a considerable amount of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract lawsuits which will inevitably impede your bankruptcy filing and discharge. Every creditor holds the same weight under Australian Law, so if you completely repay one over another, the bankruptcy trustee will file a claim against the creditor in what’s called a clawback lawsuit. This is undertaken to recoup the money that was paid to the favoured creditor to ensure it can be distributed equally between all creditors.
Lie or Conceal any Information
Whatever you do, do not lie or conceal any information regarding your financial situation. When you file for bankruptcy, you are required by Law to provide complete and detailed information concerning your assets, income, debts, and expenses. Failing to reveal an asset, for instance, is considered misrepresentation and you will be liable to criminal prosecution. If you’re unclear of anything, talk with your lawyer and spend the time to investigate to make certain you are providing the correct information. When it concerns money, there are computerised trails pretty much everywhere, so don’t think you can conceal anything. You might get away with it in the first instance, but it can plague you and your case later down the track.
Transfer or Move Assets
Transferring or moving assets to a family member’s name to protect those assets from bankruptcy is a fable. As a matter of fact, transferring assets will not shield those assets in any way, and may be taken as fraudulent activity which comes with criminal consequences. Selling assets to repay your debts is, of course, a common response to attempt to relieve the financial burden. It’s vital to keep in mind that your Statement of Financial Affairs is a legal record, so you must be completely honest with your financial history or face the possible consequences of getting caught. You will be asked by the trustee if you sold, transferred or gave away any assets, normally for a period of one year before filing for bankruptcy. You will also be asked what you did with the money you acquired from those transfers, so be wary of a preferential transfer, especially with friends and family members.
Deposit Non-Income Earning Money Into Your Bank Account
Family and friends are there to assist in times of distress. If you’re encountering financial problems, it’s normal for family and friends to offer money to you to mitigate the burden. Do not deposit any money from friends or relatives into your bank account, or any money that is not specifically income related such as work or dividends. It’s also crucial to keep work related money and personal money completely separate from each other. All of these activities can produce a lot of confusion and can lead to claims of fraud when filing for bankruptcy.
As you can see, there are some serious consequences for relatively insignificant financial decisions when you go bankrupt. To make certain you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. To learn more or to speak to someone about your situation, contact Bankruptcy Experts Canberra on 1300 795 575 or visit http://www.bankruptcyexpertscanberra.com.au